The Future of Direct Distribution Technology - a hotelier’s view

My personal highlight from the Hotel Technology Forum in Berlin last week was the talk by Dr.Jan Sammeck, Director of eCommerce at Deutsche Hospitality. Jan works across three brands: JAZ Hotels Steigenberger hotels and Intercity Hotels and described his views on the future of distribution technology and specifically the process his team uses to assess what technology and channels to ignore and where to invest.

The "abundance of technology” available to hotels can be confusing and overwhelming. Jan advises always coming back the the simple question: "will this impact my hotel’s bottom line?”. However, whilst the question is pretty simple it can be a challenge to answer. How do you attribute marketing spend that affects people at various points in their journey? how do you assess whats’ really working and whether it’s worth spending 5% CPA on cart abandonment pop-ups or only 3%?

After exploding the ‘myth of direct bookings' (direct is not 'free’), Jan went on to describe the system they have built to monitor and manage digital marketing performance across their hotel portfolio: Deutsche Hospitality’s “Cost-of-Sale Management System”.

Cost-of-Sale Management

The system sucks in data from key acquisition channels. The APIs from meta-search sites like Trivago and advertising platforms like Google and Facebook are used to pull in the group’s spend on each of these channels. Once this data is pulled into a single database it is held against each property in the group.

As a result the team can see the current online marketing spend per property and, importantly, they can see how the performance of each channel differs for each property. They also get a better reading on spill-over effects from spend in one channel to bookings in another. The database is set up to provide a cost-of-sale number measured as a percentage of ADR. The benefit of this is an easy and fair comparison to the costs of OTA acquisition.

Having a clear comparison to OTA costs is useful when determining whether to increase room availability to third-party distributors. But what comes next is more interesting. Jan and his team have split their hotels into different segments. A busy property in Berlin may be easier to fill than a resort in Bavaria. Thus the group may be prepared to pay e.g. 9% COS for the Bavarian property but only 7% for the Berlin property.

Setting a COS target for a hotel helps reduce the complexity in managing day-to-day acquisition decisions. Steigenberger and JAZ can now determine the exact number of bookings they want from each channel - if the 99th booking comes at a COS of 8.9% but 100th is at 9.1% then the channel is switched of at 99 bookings.

Jan did add that there are other benefits of attracting a direct customer which are not accounted for in the initial booking - customer life time value is an even better measure - and a valuation for this can be added to the model.

COS Management

Looking into the future, Jan’s had two bits of advice for fellow hoteliers:
1. think about “what is it that OTAs cannot deliver?” For example he believes mobile apps can have an important part to play for a hotel group like Steigenberger
2. make life less demanding for the user. This might be simplifying information acquisition or making booking more comfortable, for example using live chat.




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All of our blogs are written in-house by the team to give you a mixture of news hot off the press, advice columns for hoteliers, and Triptease business news.

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